There are a number of job related cancellation programs for borrowers working in public service and helping professions. You should also check to see if your state has student loan forgiveness programs.
Public Service Loan Forgiveness (PSLF)
Public Service Loan Forgiveness is available to Direct Loan borrowers that work in public service jobs for ten years and repay their loans through an eligible repayment plan. Any remaining balance is then canceled after the ten years of service is completed. This program will only benefit borrowers who still owe money on federal loans after ten years of public service employment. You are most likely to reach this point if your income is low relative to your debt and if you qualify for reduced payments under an income driven repayment plan at any time during the ten years.
Who is Eligible?
The program applies only to Direct loan borrowers, but it covers all types of Direct loans, including Stafford, PLUS and consolidation loans.
Parent PLUS borrowers are eligible based on their own employment, not on the employment of the student on whose behalf they borrowed.
Borrowers with other federal government loans can consolidate with Direct Loans in order to obtain this benefit.If you already have a FFEL consolidation loan, you are allowed to reconsolidate with Direct Loans to start qualifying. Be careful if you want to consolidate your Direct loans. If you make qualifying payments on a Direct loan and then consolidate that loan, you’ll lose credit for the PSLF payments.
In order to qualify, you must not be in default and you must have made 120 monthly payments (10 years of payments) on your loans AFTER October 1, 2007. Payments can be made through any one or combination of eligible repayment plans, including income-driven repayment, ten year standard plan payments, or graduated or extended payments of not less than the monthly amount that would be due under a ten year standard plan.
You must be employed in a public service job at the time of the forgiveness and must have been employed in a public service job during the period in which you made each of the 120 payments.
What is a “public service job”?
Jobs with federal, state, local or tribal government organizations, public child or family service agencies, 501(c)(3) non-profit organizations, or tribal colleges or universities should be considered “public service jobs.” Government employers include the military and public schools and colleges. Time spent serving in a full-time Americorps or Peace Corps position will also count toward the ten year repayment requirement, but there are some limits that you should be aware of an check into.
If you do not work for a government agency or for a 501(c)(3) non-profit, you may still be eligible in certain circumstances. You should qualify if you are working for certain other organizations that provide any of the following services: emergency management; military services; public safety; law enforcement; public interest law services; early childhood education; public service for individuals with disabilities and the elderly; public health; public education; public library services; and school library or other school-based services. Not all organizations providing these services will qualify. Businesses organized for profit, labor unions, partisan political organizations, organizations engaged in religious activities (unless the qualifying activities are unrelated to religious instruction, worship services or any form of proselytizing) are excluded.
The American Bar Association sued the Department of Education in December 2016 challenging the Department’s decision to retroactively change eligibility requirements for some jobs. Three of the four plaintiffs in the case won an important victory in a February 2019 district court decision. Stay tuned for more information.
The Job Must Be Full-Time
“Full-time” is defined as working in qualifying employment in one or more jobs for the greater of an annual average of at least 30 hours per week or the number of hours the employer considers full-time (unless you have two or more employers). You do not have to use an annual average to determine full-time if you have a shorter employment period that is at least 8 months. In that case, full-time is defined as an average of 30 hours per week. Vacation or leave time provided by your employer or leave taken for a condition under the Family and Medical Leave Act is not considered in determining the average hours worked.
There is no requirement that you must work in the same public service job for the entire ten year period. There is also no requirement that the ten years of public service be consecutive.
Applying for Cancellation
The public service forgiveness employment certification form allows you to get your employer’s certification of employment while you are still employed or shortly after leaving. While use of the form is not required, the Department of Education will only keep track of your progress toward meeting the eligibility requirements if you submit the form. You may submit the form every year or less frequently to cover more than one year’s employment.
If you choose not to submit the certification forms, you will have to submit them later when you apply for the final forgiveness and also submit a final application for forgiveness at that point.
Even if you have submitted the certification forms, you will still need to submit the final application for public service forgiveness after you have made each of the required 120 qualifying monthly payments.
The Department explains the process and potential problems on its web site:
“If you do not periodically submit the Employment Certification Form, then at the time you apply for forgiveness you will be required to submit an Employment Certification Form for each employer where you worked while making the required 120 qualifying monthly payments.
We will take the following actions after we receive your Employment Certification Form:
- We will review your Employment Certification Form to ensure that it is complete and to determine whether your loans and employment qualify for the PSLF Program.
- We will notify you if the form you submitted is incomplete or if we cannot determine, based on the information provided on the form, whether your employment qualifies. We may ask you to provide additional information or documentation to help us determine whether you were employed by a qualifying employer.
- If we determine that your employer is not a qualifying employer, we will notify you that your employment does not qualify. If you believe there is additional information that would establish the eligibility of your employer, you will have the opportunity to provide that information.
- If we determine that you do not have eligible loan types, we will notify you that your loans do not qualify.
- If we determine that your loans and employment qualify, we will notify you.
- If we determine that your employment qualifies, and if some or all of your federal student loans that are owned by the U.S. Department of Education are not already serviced by FedLoan Servicing, those loans will be transferred to FedLoan Servicing. You will receive a notice if your loans are transferred.
- If we determine that your employment qualifies, we will then review your payment history (including any payments you made to another federal loan servicer before your loans were transferred) to determine how many payments made during the period of employment certified on the Employment Certification Form are qualifying monthly payments for PSLF. We will then notify you of the total number of qualifying payments you have made, and how many payments you must still make before you can qualify for PSLF.
After you submit an Employment Certification Form and your loans have been transferred to FedLoan Servicing (if FedLoan Servicing was not already your loan servicer), and after FedLoan Servicing has determined the number of qualifying payments that you have made during the period of qualifying employment in your Employment Certification Form, you will receive a letter telling you the number of qualifying payments you have made.
The number of qualifying payments you have made will be updated whenever you submit another Employment Certification Form that documents a new period of qualifying employment.
Any amounts cancelled through the program should not be considered taxable income.
Temporary Expanded Public Service Loan Forgiveness
Because you must work for 10 years in a qualifying job to get forgiveness and the program only started in late 2007, borrowers have only recently become eligible for relief. Unfortunately, so far, more than 99 out of every 100 public service workers who applied for loan forgiveness were rejected. Among other actions and investigations, the Student Borrower Protection Center and American Federation of Teachers have launched an investigation into problems with administration of PSLF.
In an effort to help borrowers who got bad advice about eligibility or experience other problems, Congress passed legislation in 2018 that provides limited, additional conditions under which a borrower may become eligible for public service loan forgiveness if some or all of the payments the borrower made on a Direct Loan were under a nonqualifying repayment plan. The Department is calling this new program the Temporary Expanded Public Service Loan Forgiveness (TEPSLF) opportunity. Note that this is not only a temporary opportunity, but there is also limited funding. This means that the funds will be provided on a first come, first served basis and unless there is new legislation, the opportunity will end once the funds are used up.
More Information about PSLF
The Department directs borrowers with questions to the public service web site. If you still have questions, the Department directs you to call FedLoan Servicing at 1-855-265-4038.
For more information, American Student Assistance posted this quiz to help you navigate this program. For ways to avoid common student loan forgiveness mistakes, see this blog post from private attorney Adam Minsky.
Teacher Loan Forgiveness
If you received a Stafford Loan on or after October 1, 1998, and teach full time for five consecutive years in certain schools serving low-income students, you might be eligible to have a portion of your loan canceled. This applies to FFEL Stafford Loans, Direct Subsidized and Unsubsidized Loans, and in some cases, Consolidation Loans. Up to $5,000 may be canceled. The limit is $17,500for borrowers who teach five consecutive years as highly qualified math or science teachers in eligible secondary schools or as special education teachers in eligible elementary or secondary schools. Teachers who are employed by educational services agencies are also eligible.There are programs that will fully or partially cancel student loans for borrowers who work for a certain amount of time as teachers. Perkins loans may be fully canceled for full-time teachers working at low-income schools or teaching certain subject areas.
Many teachers will also qualify for public service loan forgiveness.
TEACH grants are not tied to financial need and provide up to $4,000 annually to students who are enrolled in an eligible program and who agree to teach full-time in a high-need field at a public or private elementary or secondary school that serves low-income students. Recipients of these grants must teach for at least four years within eight years of completing the program for which the TEACH Grant was awarded. The first TEACH grants were awarded to eligible students for the 2008-09 school year.
Students should know what they’re getting into before signing up for a TEACH grant. Among other problems, if you do not complete the required years of teaching, have trouble finding a job in a “high need” area, change your mind about teaching, or fail to maintain a satisfactory GPA while in school, any grant money you received will turn into a loan that you will have to repay. It will be an unsubsidized Direct Stafford loan. Interest will accrue from the date that each grant disbursement was made. There are only a few ways, such as total and permanent disability, to cancel the obligation or extend the eight year teaching period.
Due to problems with this conversion process from grants to loans, the Department has created a process for TEACH grant recipients whose TEACH Grants were converted to Direct Unsubsidized Loans to request reconsideration of the conversions. You will be able to request a reconsideration if you met or are meeting the TEACH Grant service requirements within the eight-year service obligation period, but had your grants converted to loans because you did not comply with the annual certification requirement.
Peace Corps and AmeriCorps
AmeriCorps members are eligible to get the interest on their student loans paid while they are serving. There are a number of prerequisites to this benefit. You will only get this benefit if you complete your service. Exceptions are sometimes made if you fail to complete your service for a compelling reason. You are also eligible to get a forbearance on loan payments while you are serving.
AmeriCorps and Peace Corps members might be able to have their benefits counted toward the ten year public service cancellation period.
Peace Corp volunteers with Perkins loans may cancel up to 70% of their loan obligations. The other loan programs do not have special discharges for Peace Corp volunteers. but you can get a deferment if you are a Peace Corp volunteer.
National Health Service Corps
The National Health Service Corps is a competitive program that recruits fully trained and licensed health professionals to provide primary health services in selected high-need communities. Professionals selected for this program may receive funds to be applied to the principal, interest, and related expenses of government loans and certain commercial loans.
Many employers offer student loan repayment or discharge programs. Employers offer these as an incentive to recruit new employees or retain current employees. These programs vary a lot depending on the employer. You should check with a potential employer to see if they offer loan forgiveness or special repayment options.